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Originally Posted by steve B
What I wonder is how they expect sellers on the edge of either of those thresholds to handle the collection of taxes. Are they required on sales After the threshold has been crossed? Or on all sales, so sort of retroactively.
What happens if I collect tax, and end up at say 199 transactions and under 100K? Do I refund the tax collected (which would be proper, as it wasn't required) Or do I still pay it (Which is also proper as I've collected it on their behalf, so it's owed to them)
And, if I have a competitor who hasn't met the threshold and hasn't been collecting tax because they know they won't pass that level. Can I then stick it to them by having a friend make a bunch of purchases right near the end of the year putting them over and possibly being on the hook for the taxes they'd now owe.
What a mess.
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Those are great questions, and things that need to be addressed by South Dakota ultimately. You're right in that it is sometimes impossible to predict exactly when you would hit these thresholds and thus become responsible for collecting and remitting the sales tax. I would suggest to anyone that felt they were going to hit these thresholds that they just start charging the sales tax and filing with SD. The thresholds are only for when it becomes mandatory under the state law, it doesn't mean that a person or company that hasn't reached the volume of sales or transactions to hit the threshold yet can't still go ahead and start to charge and collect the sales tax before they reach that point.
Also, in cases where a person/company reaches the threshold during some year, I would just start the process of collecting and remitting the sales tax at that point, and going forward. Don't forget that before doing so, the person/company would also have to register with the state of South Dakota first to let them know they are now liable for collecting and remitting sales tax. Not 100% sure what that process is in South Dakota, but you normally have to register in whatever state(s) you're in and get some kind of license or ID #, and then start filing sales tax returns and remitting the sales tax collected going forward. The states know it isn't easy to go back and try to collect sales tax from prior customers, so I doubt they'll end up forcing any person/business to do so.
As for the idea of having a friend start buying from a competitor to push them over the threshold to have to start collecting sales tax in a particular state, how would you know how close to the thresholds someone is? You could have a friend end up spending a lot of time, effort and money, for nothing. Also, just because someone hits one of these thresholds doesn't mean they'll pay attention to it. And as of right now, no one knows to what extent South Dakota, or any other state for that matter, will go to check up on companies to enforce these laws. These states don't have the resources to go after every single person/business out there to enforce rules like this. They'll immediately go after the low hanging fruit and get the big companies, like Wayfair, Amazon and Overstock to comply, if they aren't already. As to how much time and effort they then put in to go after the smaller businesses.....that is a whole other question no one can likely answer as of right now. Since these vendors are by definition outside of the state they'll be collecting sales tax for, its not like some state auditor is going to pull up at their doorstep and ask to check their records. That's where I wonder if the states will try to get third party information from someone like Ebay to start determining who to go talk to.